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Axis Bank: One Time Pain - Views on News from Equitymaster
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Axis Bank: One Time Pain
Oct 26, 2016

Axis Bank declared the results for the second quarter of the financial year ended March 2017 (2QFY17). The bank has reported 11.1% YoY growth in net interest income while net profits declined 83.3% YoY in 2QFY17. Here is our analysis of the results.

Performance summary
  • Net interest income grows by 11.1% YoY during 2QFY17 on the back of 18.5% YoY growth in advances.
  • Net interest margins (NIM) declined to 3.6%.
  • Net profits declined by 83.3% YoY in 2QFY17 due to a huge rise in provisions.
  • Both the gross (4.2%) and net NPA (2.0%) levels were higher than 1.3% and 0.5% levels respectively in September 2015.
  • Capital adequacy ratio (CAR) reduced slightly to 15.2% at the end of June 2017 as per Basel III norms (Tier 1 capital at 12.0%).

    Rs (m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Interest income 99,596 111,591 12.0% 198,958 222,730 11.9%
    Interest expense 58,975 66,452 12.7% 117,774 132,422 12.4%
    Net Interest Income 40,621 45,139 11.1% 81,183 90,308 11.2%
    Net interest margin (%) 3.9% 3.6%
    Other Income 20,414 25,397 24.4% 43,397 52,779 21.6%
    Other Expense 24,755 29,534 19.3% 47,380 57,392 21.1%
    Provisions and contingencies 7,072 36,227 412.3% 18,289 57,399 213.8%
    Profit before tax 36,280 41,002 13.0% 77,200 85,695 11.0%
    Tax 10,051 1,584 -84.2% 19,970 9,550 -52.2%
    Profit after tax/ (loss) 19,156 3,191 -83.3% 38,941 18,746 -51.9%
    Net profit margin (%) 19.2% 2.9% 19.6% 8.4%
    No. of shares (m)* 2,389.8
    Book value per share (Rs) 225.2
    P/BV (x)* 2.2

    *Book value as on 30th September 2016

  • Axis Bank witnessed growth in both retail and corporate loan portfolios in the second quarter of FY17. Housing loans comprised 45% of total retail loan book. With branch network of over 3,106 the bank has undoubtedly leveraged its franchise well and capitalized on CASA deposits. CASA deposits improved to 45% of overall deposits at the end of June 2016. The growth in CASA deposits continued to grow higher than the growth in term deposits.

    Deposit growth continues to lag...
    (Rs m) 2QFY16 % of total 2QFY17 % of total Change
    Advances 2,980,660 3,531,700 18.5%
    Retail 1,194,480 40.1% 1,492,840 42.3% 25.0%
    Corporate 1,786,180 59.9% 2,038,860 57.7% 14.1%
    Deposits 3,241,010 3,801,870 17.3%
    CASA 1,434,080 44.2% 1,699,610 44.7% 18.5%
    Term deposits 1,806,930 55.8% 2,102,260 55.3% 16.3%
    Credit deposit ratio 92.0% 92.9%
  • While Axis Bank's overall fee income registered a growth of 7% YoY during 2QFY17, the retail fees (43% of fee income source) grew by 17% YoY in 2QFY17 offering a big boost.
  • Both the gross (4.2%) and net NPA (2.0%) levels were higher than 1.3% and 0.5% levels respectively in September 2015. The provision coverage ratio declined and is presently at 60% at the end of September 2016. The restructured advances were 2.0% of net customer assets.
  • Almost 89% of slippages in corporate lending came from the watch list category. Further the bank has kept loan accounts amounting to Rs 138 bn under its 'watch list'.
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  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
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  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
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  4. Equitymaster's Associate has received compensation for products or services other than investment banking or merchant banking or brokerage services from Axis Bank in the past twelve months.
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